CBIZ(CBZ) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for CBIZ, Inc Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents CBIZ's unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and notes, for Q2 and H1 2021 Condensed Consolidated Balance Sheets Total assets increased to $1.66 billion by June 30, 2021, driven by acquisitions, while liabilities rose due to bank debt, and equity saw a modest increase Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $1,656,628 | $1,513,754 | | Goodwill and other intangible assets, net | $807,939 | $756,750 | | Total Liabilities | $944,296 | $811,134 | | Bank debt | $163,300 | $108,000 | | Total Stockholders' Equity | $712,332 | $702,620 | Condensed Consolidated Statements of Comprehensive Income Q2 2021 revenue grew 17.6% to $278.6 million, but net income significantly decreased to $8.6 million due to a $30.5 million legal settlement Q2 Financial Performance (in thousands, except per share data) | Metric | Q2 2021 (in thousands) | Q2 2020 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Revenue | $278,648 | $236,943 | +17.6% | | Operating (Loss) Income | $(2,570) | $16,767 | -115.3% | | Net Income | $8,607 | $21,468 | -59.9% | | Diluted EPS | $0.16 | $0.39 | -59.0% | Six-Month Financial Performance (in thousands, except per share data) | Metric | H1 2021 (in thousands) | H1 2020 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Revenue | $579,378 | $514,398 | +12.6% | | Operating Income | $59,706 | $83,906 | -28.8% | | Net Income | $58,816 | $58,316 | +0.9% | | Diluted EPS | $1.09 | $1.05 | +3.8% | - A one-time legal settlement of $30.5 million was recorded in Q2 2021, which significantly impacted operating and net income for the period[12][31] Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $66.3 million in H1 2021, with significant cash usage for acquisitions and share repurchases Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | H1 2021 (in thousands) | H1 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $66,294 | $55,523 | | Net cash (used in) provided by investing activities | $(40,137) | $12,807 | | Net cash used in financing activities | $(42,582) | $(70,560) | - Key uses of cash in H1 2021 included $43.2 million for business acquisitions and $64.5 million for treasury stock repurchases[19] Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, debt, legal contingencies, and business combinations, highlighting a $41.5 million legal settlement and four H1 2021 acquisitions - On June 24, 2021, CBIZ settled a lawsuit with UPMC for a total of $41.5 million, resulting in a recorded one-time settlement loss of $30.5 million in the second quarter[31] - During the first six months of 2021, the company completed four acquisitions: Middle Market Advisory Group (MMA), Wright Retirement Services, Bernston Porter & Company (BP), and Optumas[46][47] Aggregated Acquisition Details (H1 2021 vs H1 2020, in thousands) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Total Recorded Purchase Price | $67,288 | $15,057 | | Cash Paid | $43,104 | $9,443 | | Goodwill | $39,017 | $11,158 | | Estimated Annualized Revenue | $41,900 | $6,100 | - In H1 2021, the company sold one business in the Benefit and Insurance practice group for $9.7 million, recording a gain of $6.4 million[51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2021 revenue growth of 17.6%, segment performance, the impact of a major legal settlement, and capital allocation priorities Executive Summary & Results of Operations Q2 2021 revenue increased 17.6% to $278.6 million, but a $30.5 million legal settlement significantly impacted net income and diluted EPS Revenue Growth Summary (Q2 & H1 2021) | Period | Total Revenue Growth (%) | Same-Unit Revenue Growth (%) | Acquired Revenue Growth (net) (%) | | :--- | :--- | :--- | :--- | | Q2 2021 | 17.6% | 10.5% | 7.1% | | H1 2021 | 12.6% | 6.8% | 5.9% | - A settlement loss of $30.5 million was recorded for the three and six months ended June 30, 2021, related to a lawsuit with UPMC[81] - Interest expense decreased by 53.8% in Q2 and 42.5% in H1 2021 compared to 2020, driven by lower average debt balances[82][85] Operating Practice Groups Financial Services led growth with 21.1% revenue increase in Q2, while Benefits and Insurance Services also grew, and National Practices remained stable Financial Services Performance (Q2 2021 vs Q2 2020) | Metric | Q2 2021 ($M) | Q2 2020 ($M) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $186.6M | $154.1M | +21.1% | | Same-unit Revenue Growth | +13.3% | - | - | | Gross Margin % | 19.1% | 17.3% | +180 bps | Benefits and Insurance Services Performance (Q2 2021 vs Q2 2020) | Metric | Q2 2021 ($M) | Q2 2020 ($M) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $82.6M | $73.9M | +11.7% | | Same-unit Revenue Growth | +5.3% | - | - | | Gross Margin % | 18.0% | 17.1% | +90 bps | - The National Practices group revenue is primarily driven by a cost-plus contract with a single client, which accounts for approximately 75% of the segment's revenue[113] Liquidity and Capital Resources The company maintains strong liquidity with $233.4 million available on its credit facility, prioritizing strategic acquisitions and share repurchases - Days Sales Outstanding (DSO) was 84 days at June 30, 2021, compared to 87 days at June 30, 2020, and 72 days at December 31, 2020[119] - As of June 30, 2021, the company had $163.3 million outstanding on its credit facility with approximately $233.4 million of available funds[126] - In the first half of 2021, CBIZ completed four acquisitions for $43.1 million in cash and repurchased 2.1 million shares of its common stock for approximately $66.5 million[128][66] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate risk on floating-rate debt, mitigated by interest rate swaps, with no speculative derivative use - A 100 basis point change in market interest rates would impact annual interest expense by approximately $0.8 million[139] - As of June 30, 2021, the company had three interest rate swaps outstanding with a total notional value of $85.0 million, effectively fixing the interest rate on a significant portion of its variable-rate debt[141][33] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - Based on their evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[146] - No changes were made to internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[147] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other required disclosures, referencing prior filings where applicable Item 1. Legal Proceedings Legal proceedings information is incorporated by reference from Note 5, detailing the UPMC settlement and ongoing litigation - Information regarding legal proceedings is incorporated by reference from Note 5, Commitments and Contingencies[151][31] Item 1A. Risk Factors No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2020 - The company directs investors to review the risk factors discussed in its Annual Report on Form 10-K for the year ended December 31, 2020[152] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued 53,000 shares for contingent consideration and repurchased 964,000 shares in Q2 2021 under its buyback plan - In H1 2021, approximately 53,000 shares of common stock were issued as payment for contingent consideration for previous acquisitions in unregistered transactions[153] Share Repurchases (Q2 2021) | Period | Total Shares Purchased (shares) | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | April 2021 | 314,000 | $33.44 | | May 2021 | 367,000 | $34.03 | | June 2021 | 283,000 | $33.04 | | Q2 Total | 964,000 | $33.55 | - As of June 30, 2021, a maximum of 4,036,000 shares may yet be purchased under the current share repurchase plan[156] Item 3. Defaults Upon Senior Securities This section is not applicable as the company reports no defaults upon senior securities Item 4. Mine Safety Disclosures This section is not applicable as the company has no mine safety disclosures to report Item 5. Other Information This section is not applicable as the company reports no other information Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including required certifications and XBRL data files